Quick Answer
Traditional 401(k) contributions are pre-tax now and taxed as ordinary income in retirement; Roth 401(k) contributions are after-tax now and grow completely tax-free. The 2026 employee deferral limit is $24,500 ($32,500 with the 50+ catch-up, $35,750 for ages 60–63). New in 2026: anyone who earned over $150,000 in FICA wages the prior year must make catch-up contributions as Roth, not traditional.
Both accounts hold the same investments and the same employer match — the only real difference is when you pay the tax. Get that timing decision right and it can be worth tens of thousands of dollars over a career. Here's how the two actually compare.
Pre-tax now vs. tax-free later
Traditional 401(k)
Contributions reduce your taxable income this year. Withdrawals in retirement — contributions and growth — are taxed as ordinary income.
Roth 401(k)
Contributions are made with after-tax dollars — no deduction now. Qualified withdrawals in retirement, including all growth, are tax-free.
One quirk worth knowing: a traditional 401(k) contribution reduces your income tax but not your FICA tax — you still pay the full 7.65% on money you contribute either way. See our FICA guide for that detail.
2026 contribution limits
The employee deferral limit for 2026 is $24,500 — this is a combined cap across traditional and Roth contributions, not $24,500 each. Those 50 and older can add a $8,000 catch-up ($32,500 total); a higher "super catch-up" of $11,250 applies specifically to ages 60–63 (bringing that group's total to $35,750).
The employer match doesn't count against your personal deferral limit — it's a separate, additional contribution from your employer, on top of what you put in.
New for 2026: high earners must use Roth for catch-up
Under the SECURE 2.0 Act, starting in 2026, anyone who earned more than $150,000 in FICA wages in the prior year must make their catch-up contributions on a Roth basis — traditional catch-up is no longer an option for this group, even if the rest of their 401(k) is traditional. If your plan doesn't offer a Roth option, this rule can limit how much you're able to catch up at all; check with your plan administrator.
How to think about which one to choose
- Expect a lower tax bracket in retirement than today? Traditional often wins — you take the deduction while your rate is high, and pay tax later at a lower rate.
- Early career, or expect rates to rise? Roth often wins — you pay tax now while your rate is relatively low, and lock in tax-free growth.
- Not sure? Splitting contributions between both gives you tax diversification — some money taxed now, some taxed later — so you're not fully exposed to a guess about future tax rates.
A Roth 401(k) is also worth comparing against a Roth IRA — the 401(k) version has no income limit and a much higher contribution cap, which matters if your income is too high to contribute to a Roth IRA directly.